Delta Airlines 2006 Annual Report Download - page 72

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Bankruptcy Court directed the appointment of two separate retiree committees under Section 1114, one to serve as the authorized representative of
non-pilot retirees, and the other to serve as the authorized representative of pilot retirees. On October 19, 2006, the Bankruptcy Court approved agreements
that we reached with these committees regarding healthcare benefits for current retirees. These agreements became effective January 1, 2007. See Note 10 for
additional information on these agreements.
Magnitude of Potential Claims.The Debtors filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other
things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. All of the schedules are subject to amendment or
modification.
Bankruptcy Rule 3003(c)(3) requires the Bankruptcy Court to set the time within which proofs of claim must be filed in a Chapter 11 case. The
Bankruptcy Court established August 21, 2006 at 5:00 p.m. (the “Bar Date”) as the last date and time for each person or entity to file a proof of claim against
the Debtors. Subject to certain exceptions, the Bar Date applies to all claims against the Debtors that arose prior to the Petition Date.
As of February 7, 2007, claims totaling about $87.0 billion have been filed with the Bankruptcy Court against the Debtors, and we expect new and amended
claims to be filed in the future, including claims amended to assign values to claims originally filed with no designated value. We have identified, and we
expect to continue to identify, many claims that we believe should be disallowed by the Bankruptcy Court because they are duplicative, have been later
amended or superseded, are without merit, are overstated or for other reasons. As of February 7, 2007, the Bankruptcy Court has disallowed approximately
$1.2 billion of claims and has not yet ruled on our other objections to claims, the disputed portions of which aggregate to an additional $2.8 billion. We expect
to continue to file objections in the future. Because the process of analyzing and objecting to claims will be ongoing, the amount of disallowed claims may
increase significantly in the future.
Through the claims resolution process, differences in amounts scheduled by the Debtors and claims filed by creditors will be investigated and resolved,
including through the filing of objections with the Bankruptcy Court where appropriate. In light of the substantial number and amount of claims filed, the
claims resolution process may take considerable time to complete, and we expect that it will continue after our emergence from Chapter 11. Accordingly, the
ultimate number and amount of allowed claims is not presently known, nor is the exact recovery with respect to allowed claims presently known.
Costs of Reorganization.We have incurred and will continue to incur significant costs associated with our reorganization. The amount of these costs,
which are being expensed as incurred, are expected to significantly affect our results of operations. For additional information, see “Reorganization Items,
net” in this Note.
Effect of Filing on Creditors and Shareowners.Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, pre-
petition liabilities and post-petition liabilities must be satisfied in full before shareowners are entitled to receive any distribution or retain any property under a
plan of reorganization. Under the Plan, current holders of our common stock would not retain or receive any property, and the common stock, and other equity
interests, would be cancelled upon the effective date of the Plan. As discussed above (see “Filing of Plan of Reorganization with the Bankruptcy Court”), if
the requirements of Section 1129(b) of the Bankruptcy Code are met, a plan of reorganization can be confirmed notwithstanding its rejection by the holders of
our common stock and notwithstanding the fact that such holders do not receive or retain any property on account of their equity interests under the plan.
Because of such possibilities, the value of our liabilities and securities, including our common stock, is highly speculative. We urge that appropriate caution
be exercised with respect to existing and future investments in any of the liabilities and/or securities of the Debtors.
Notice and Hearing Procedures for Trading in Claims and Equity Securities.The Bankruptcy Court issued a final order to assist us in preserving our net
operating losses (the “NOL Order”). The NOL Order provides for certain notice and hearing procedures regarding trading in our common stock. It also
provides a mechanism by which certain holders of claims may be required to sell some of their holdings in connection with implementation of a plan of
reorganization.
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